In a significant relief to foreign shipping companies operating in India, the Directorate General of Goods and Services Tax Intelligence (DGGI) has rescinded a tax demand of about Rs 3,000 crore for the fiscal year 2017-18 against 18 foreign companies, according to a report by the Economic times.
The tax demand was withdrawn after the shipping companies collectively assured authorities that no services had been imported in 2017-18, the report said, citing sources.
The latest move by the DGGI provides relief to foreign shipping lines such as Maersk, Orient Overseas Container Line Ltd and Hapag-Lloyd Mediterranean Shipping, which had received notices for non-payment of goods and services tax (GST) on imported services from July 2017.
However, the requirement to pay taxes for subsequent years remains in force.
The DGGI had launched an inquiry in October 2023, looking into allegations that Indian branches of foreign shipping companies and airlines had not paid GST under the reverse charge mechanism for services such as aircraft leasing, maintenance and crew salaries paid abroad.
The agency also requested detailed explanations from these companies while setting out tax demands for the period from July 1, 2017 to March 2024. In February this year, the DGGI issued subpoenas to all foreign shipping lines operating in the country.
Following summons to DGGI offices in Ahmedabad and Mumbai, the companies jointly approached the Finance Ministry and submitted a detailed breakdown of the imported services to the DGGI.
The GST Council’s adjustment committee will determine the applicability of the exemption for subsequent years and whether the import of such services by these companies is subject to tax.
DGGI uncovered Rs 1.2 trillion GST tax evasion
Earlier this week, Business standard India’s finance ministry said the DGGI had detected tax evasion amounting to Rs 1.2 trillion, attributed to misuse of fake input tax credits (ITCs) since 2020. The finance ministry, in a statement on Tuesday, said efforts have been focused on identifying and dismantling syndicates responsible for these fraudulent activities.
The GST intelligence department has identified around 59,000 potentially fraudulent companies for further verification and investigation, and 170 people involved in these schemes have been arrested. This information came to light during a national conference of GST enforcement officials, following which the Ministry of Finance issued its statement.
This development comes in the backdrop of a special initiative by the central and state governments to identify and remove fake GST registrations. The two-month nationwide campaign, launched on August 16, aims to detect suspicious or fake GSTINs, conduct necessary verifications and take corrective measures to remove such fraudulent entities from the GST system, thereby protecting government revenues.
First published: August 24, 2024 | 09:22 IS
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